US homebuilder confidence surges in July

Originally published July 16, 2014 at 10:19 am

Updated July 16, 2014 at 12:31 pm

U.S. homebuilders' confidence in the housing market surged this month to the highest level since January, reflecting a pickup in sales of new homes and heightened expectations for sales the second half of the year.

U.S. homebuilders’ confidence in the housing market surged this month to the highest level since January, reflecting a pickup in sales of new homes and heightened expectations for sales the second half of the year.

The brighter sales outlook suggests home construction could pick up in coming months after a sluggish start this year.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose this month to 53, up four points from a revised reading of 49 in June.

Readings above 50 indicate more builders view sales conditions as good, rather than poor. The latest reading is the first above 50 since January, when it was 56.

Builders’ view of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers each increased since June.

Higher mortgage rates and the bad weather weighed on home sales in late 2013 and early this year. Harsh winter weather also contributed to a sluggish start to this year’s spring home-selling season.

But sales of new homes have picked up in recent months.

New home sales jumped 18.6 percent in May to a seasonally adjusted annual rate of 504,000, the highest level in six years. That followed a 3.7 percent increase in April. The gains came after declines in February and March.

Even with the big overall gain, sales of new homes are still running at just about half the pace of a healthy real estate market.

Still, the recent pickup in sales suggests that the housing recovery may be regaining its footing after slowing earlier this year.

Economists say there is significant pent-up demand for homes as many potential buyers put off purchases over the past few years because of concerns about the economy.

“An improving job market goes hand-in-hand with a rise in builder confidence,” said David Crowe, the NAHB’s chief economist. “As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home.”

That optimism is reflected in the latest NAHB index, which is based on responses from 241 builders.

In the latest survey, builders’ view of current sales conditions for single-family homes rose four points to 57. A measure of traffic by prospective buyers increased three points to 39. And builders’ outlook for sales of single-family homes over the next six months jumped six points to 64, the highest level since September.

Housing, while still a long way from the boom of several years ago, has been recovering over the past two years.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.

The builder confidence survey sent shares in U.S. homebuilders higher in morning trading Wednesday. M/I Homes Inc., based in Columbus, Ohio, led the pack. The stock rose 72 cents, or 3.1 percent, to $23.63.